Excelsior Announces Independent Resource Update and 60% Increase in Net Present Value at Hangingstone
April 14 2010 - 5:19PM
Marketwired Canada
Excelsior Energy Limited (TSX VENTURE:ELE) ("Excelsior" or "the Company") is
pleased to announce the completion of an updated independent evaluation of
bitumen resources on Excelsior's Hangingstone property ("Hangingstone" or
"Hangingstone Asset"), near Fort McMurray, Alberta. The mechanical update was
based on the previous report "Evaluation of the Hangingstone Area, Estimation of
Discovered & Undiscovered Bitumen Initially-In-Place and Contingent and
Prospective Resources, as of July 1, 2009". The Company has drilled a total of
55 wells on the Hangingstone property where Excelsior has a 75% working interest
in 39 contiguous sections of oil sands rights.
The resource estimates were prepared by independent petroleum engineers McDaniel
& Associates Consultants Limited ("McDaniel"). The McDaniel report ("the
Report") was prepared using assumptions and methodology guidelines outlined in
the Canadian Oil and Gas Evaluation Handbook and in accordance with National
Instrument 51-101. No additional geological or engineering work was conducted
and the resource estimates, production forecasts, operating costs and capital
cost parameters are unchanged from the July 01, 2009 report prepared by
McDaniel. The effective date of the updated evaluation is December 31, 2009. The
Report incorporates the McDaniel price deck as at January 1, 2010 in the
forecast price scenario. The one percent gross overriding royalty that burdened
the Hangingstone asset and was included in the July 1, 2009 report has been paid
out and has therefore been removed as disclosed in a news release dated January
7, 2010.
"Excelsior is very pleased with the incremental valuation assigned at
Hangingstone." commented David Winter, CEO and President of Excelsior, "McDaniel
assesses the asset based on conventional SAGD technology. The valuation for the
best case contingent resources using a 10% discount is $332 million to
Excelsior's working interest share, a 60% increase from the July 1, 2010
evaluation, and $708 million for the high estimate contingent resources. The
contingent resources are assigned to only 24% of the gross Hangingstone lands.
As the financing environment for oil sands development improves we look forward
to further delineation of the high quality bitumen resources at Hangingstone,
building the COGD pilot project and moving closer to commercial bitumen
production."
Discovered and Undiscovered Petroleum Initially-in-Place
McDaniel has recognized best estimate Discovered Petroleum Initially-in-Place of
1.808 billion barrels on the Hangingstone Asset in proximity to well control
(Excelsior working interest share before royalty) with a low estimate of 1.262
billion barrels and a high estimate of 2.361 billion barrels. The area included
in Discovered Petroleum Initially-in-Place assignments, based on well control,
amounts to approximately 24% of the gross Hangingstone lands. Generally,
McDaniel's methodology for the assignment of Discovered Petroleum
Initially-In-Place requires a minimum delineation density of one well per square
mile.
McDaniel has determined additional prospectivity in an Undiscovered Petroleum
Initially-in-Place assignment. The Report assigns 2.849 billion barrels of best
estimate Discovered and Undiscovered Petroleum Initially-in-Place to the
Hangingstone Asset (Excelsior working interest share before royalty) with a low
estimate of 2.137 billion barrels and a high estimate of 3.561 billion barrels.
The total Discovered Petroleum Initially-in-Place and Undiscovered Petroleum
Initially-in-Place includes unrecoverable volumes and is not an estimate of the
volumes of the substances that will ultimately be recovered.
Contingent Resources
The Report assigned Contingent Resources to the Hangingstone Property based on
the well delineation density achieved as of March 31, 2009. Best estimate
Contingent Resources were estimated at 172 MMbbls (Excelsior working interest
share before royalty); low estimate Contingent Resources were estimated at 127
MMbbls and high estimate Contingent Resources were estimated at 230 MMbbls. The
assigned Contingent Resources are further categorized as economic.
The Report estimated that Excelsior's best estimate Contingent Resources would
generate $2.7 billion of future net revenue after deduction of $3.4 billion in
future full-cycle capital requirements over a 30 year field life and abandonment
costs of $55.5 million resulting in a net present value before income tax
discounted at 10% ("NPV(10)") of $332 million. On a NPV(10) unit basis the
report valued Excelsior's Contingent Resources at $1.93 per barrel. It should
not be assumed that the estimates of net present value described above
represents the fair market value of the Company's resources.
McDaniel calculates Contingent Resources based on that portion of Discovered
Petroleum-Initially-in-Place that meets the requisite minimum qualitative and
quantitative criteria to be exploited using conventional SAGD technology. The
Contingent Resource volumes have not been classified as Reserves at this time
pending further delineation drilling, development planning and regulatory
applications. There is no certainty that it will be commercially viable to
produce any portion of the Contingent Resources identified in the McDaniel
report.
Share Value based on Contingent Resource and Common Shares Outstanding
On a per share basis the estimated NPV(10) for best estimate Contingent
Resources equates to $2.29 per Excelsior common share outstanding. The estimated
NPV(10) for the high estimate Contingent Resources equates to $4.88 per
Excelsior common share outstanding. There are approximately 144.5 million
Excelsior common shares outstanding. It should not be assumed that the estimates
of net present value described above represents the fair market value of the
Company's securities.
Prospective Resources
McDaniel also assigned Prospective Resources to Hangingstone. Best estimate
Prospective Resources were estimated at 75 MMbbls (Excelsior working interest
share before royalty); low estimate Prospective Resources were estimated at 49
MMbbls and high estimate Prospective Resources were estimated at 92 MMbbls.
McDaniel calculates Prospective Resources based on that portion of Undiscovered
Petroleum-Initially-in-Place that is expected to meet the requisite minimum
qualitative and quantitative criteria to be exploited using conventional SAGD
technology. The Prospective Resource volumes have not been classified as
Contingent Resources at this time pending additional delineation drilling. There
is no certainty that it will be commercially viable to produce any portion of
the Prospective Resources identified in the McDaniel report.
Summary Tables Resources
----------------------------------------------------------------------------
Summary of Discovered and Undiscovered
Petroleum Initially-in-Place
Hangingstone, Excelsior Working Interest Share Before Royalty
McDaniel & Associates - December 31, 2009
( Billions of barrels)
----------------------------------------------------------------------------
Best High
Low Estimate Estimate Estimate
----------------------------------------------------------------------------
Discovered Petroleum
Initially-in-Place 1.262 1.808 2.361
----------------------------------------------------------------------------
Discovered and Undiscovered Petroleum
Initially-in- Place 2.137 2.849 3.561
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Summary of Contingent and Prospective Resources
Hangingstone, Excelsior Working Interest Share Before Royalty
McDaniel & Associates - December 31, 2009
( Millions of barrels)
----------------------------------------------------------------------------
Low Estimate Best Estimate High Estimate
----------------------------------------------------------------------------
Contingent Resources 127 172 230
----------------------------------------------------------------------------
Prospective Resources 49 75 92
----------------------------------------------------------------------------
Comparative Summary Tables Net Present Value
----------------------------------------------------------------------------
Summary of Contingent and Prospective Resources Net Present Value Before Tax
10 % Discount Hangingstone, Excelsior Working Interest Share McDaniel &
Associates - December 31, 2009 ($ million)
----------------------------------------------------------------------------
July 01, 2009 Dec 31, 2009
----------------------------------------------------------------------------
Low Estimate Contingent Resources (64) 13
----------------------------------------------------------------------------
Best Estimate Contingent Resources 208 332
----------------------------------------------------------------------------
High Estimate Contingent Resources 552 708
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Low Estimate Prospective Resources (78) (56)
----------------------------------------------------------------------------
Best Estimate Prospective Resources 0 34
----------------------------------------------------------------------------
High Estimate Prospective Resources 150 202
----------------------------------------------------------------------------
It should not be assumed that the estimates of net present value presented in
the table above represents the fair market value of the Company's resources.
Definitions:
1. Discovered Petroleum Initially-in-Place
-- Defined as that quantity of petroleum that is estimated, as of a
given date, to be contained in known accumulations prior to
production. The recoverable portion of Discovered Petroleum
Initially-in-Place includes production, reserves, and contingent
resources; the remainder of the volume is unrecoverable.
2. Undiscovered Petroleum Initially-in-Place
-- Defined as that quantity of petroleum that is estimated, on a given
date, to be contained in accumulations yet to be discovered. The
recoverable portion of Undiscovered Petroleum-Initially-in-Place is
referred to as Prospective Resources; the remainder is classified as
unrecoverable.
3. Contingent Resource
-- Defined as those quantities of petroleum estimated, as of a given
date, to be potentially recoverable from known accumulations using
established technology or technology under development, but which
are not currently considered to be commercially recoverable due to
one or more contingencies. Economic contingent resources are those
contingent resources that are currently economically recoverable.
4. Prospective Resource
-- Defined as those quantities of petroleum estimated, as of a given
date, to be potentially recoverable from undiscovered accumulations
by application of future development projects. Prospective resources
have both an associated chance of discovery and a chance of
development.
5. Low Estimate
-- Defined as a conservative estimate of the quantity that will
actually be recovered from the accumulation. If probabilistic
methods are used, this term reflects P90 confidence level.
6. Best Estimate
-- Defined as the best estimate of the quantity that will actually be
recovered from the accumulation. If probabilistic methods are used
this term is a measure of central tendency of the uncertainty
distribution (P50).
7. High Estimate
-- Defined as an optimistic estimate of the quantity that will actually
be recovered from the accumulation. If probabilistic methods are
used the term reflects a P10 confidence level.
About Excelsior Energy
Excelsior is an early stage, oil sands company with 58 operated sections on two
contiguous blocks in the Hangingstone and West Surmont areas of the Athabasca
Oil Sands Region near Fort McMurray, Alberta. The Company has developed a
proprietary in situ combustion technology ("Combustion Overhead Gravity
Drainage" or "COGD") which has potential for improved economies in the
development and recovery of heavy oil and bitumen. An application for an
experimental pilot project to field demonstrate the COGD technology was
submitted in at the end of the second quarter of 2009 with a targeted start up
in early 2011. Excelsior's strategy is to capture oil and gas appraisal and
development opportunities where we can leverage Management's diverse
international operating, heavy oil and field development expertise with
developing technologies to produce oil and gas. Additional information about
Excelsior and its business activities is available on SEDAR at www.sedar.com or
the Company's website at www.excelsior-energy.com.
Estimations of reserves and future net revenue discussed in this press release
constitute forward looking statements. See "Forward Looking Statements" below.
Forward Looking Statements
This press release contains certain forward-looking statements and
forward-looking information (collectively referred to herein as "forward-looking
statements") within the meaning of Canadian securities laws. All statements
other than statements of historical fact are forward-looking statements.
Forward-looking information typically contains statements with words such as
"anticipate", "believe", "plan", "continuous", "estimate", "expect", "may",
"will", "project", "should", or similar words suggesting future outcomes. In
particular, this press release contains forward-looking statements pertaining to
the quantity of resources, the net present values of resources on a per share
basis and the subsequent filing of an annual information form. Statements
relating to "resources" are forward-looking statements, as they involve the
implied assessment, based on certain estimates and assumptions that the
resources described exist in the quantities predicted or estimated and can
profitably be produced in the future.
Undue reliance should not be placed on forward-looking statements, which are
inherently uncertain, are based on estimates and assumptions, and are subject to
known and unknown risks and uncertainties (both general and specific) that
contribute to the possibility that the future events or circumstances
contemplated by the forward-looking statements will not occur. There can be no
assurance that the plans, intentions or expectations upon which forward-looking
statements are based will in fact be realized. Actual results will differ, and
the difference may be material and adverse to Excelsior and its shareholders.
Forward-looking statements are based on Excelsior's current beliefs as well as
assumptions made by, and information currently available to, Excelsior
concerning anticipated financial performance, business prospects, strategies,
regulatory developments, future commodity prices, future production levels, the
ability to obtain equipment in a timely manner to carry out development
activities, the ability to market or products successfully to current and new
customers, the impact of increasing competition, the ability to obtain financing
on acceptable terms, and the ability to add production and ultimately reserves
through development and exploration activities. Although management considers
these assumptions to be reasonable based on information currently available to
it, they may prove to be incorrect. By their very nature, forward-looking
statements involve inherent risks and uncertainties, both general and specific,
and risks that forward-looking statements will not be achieved. These factors
may be found under the heading "Risk Factors" in Excelsior's Annual Information
Form for the year ended December 31, 2008.
The forward-looking statements contained in this press release are made as of
the date hereof and Excelsior does not undertake any obligation to update
publicly or to revise any of the included forward-looking statements, except as
required by applicable law. The forward-looking statements contained herein are
expressly qualified by this cautionary statement.
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